Insurance vs Fee-for-Service—The Story Buyers Want to Hear
Let's talk about the question that gets asked in every dental practice diligence call.
What's your insurance mix?
The honest answer to that question — the breakdown of fee-for-service vs PPO vs Medicaid vs Delta-something-or-other — is one of the three or four numbers that drives your sale price. Buyers know this. Sophisticated buyers ask it before they ask anything about your endo cases or your CEREC. Less sophisticated buyers ask it eventually, often through their accountant, often after they've already mentally adjusted their offer.
So here's what I want to walk you through: how to think about insurance mix as a value driver, what story buyers are reading from your numbers, and what you can do about it in the 18-24 months before you list.
Let's get into it.
1. Why the Mix Matters More Than You Think
A dental practice with a 65 percent fee-for-service mix is a fundamentally different financial entity than one with 65 percent PPO mix. Same revenue. Same chair count. Same patient base, on paper.
But:
The FFS practice has higher gross margin per visit
The FFS practice has more pricing flexibility year over year
The FFS practice has a stickier, more loyal patient base on average
The FFS practice carries less administrative drag from claims processing and write-offs
A buyer evaluating these two practices is not looking at trailing twelve months revenue. They're looking at how predictable, defensible, and growable the revenue is going forward. Insurance mix tells them.
This is not a moral statement about insurance. PPO practices serve real communities and provide real value. The point is that buyer multiples — the number that determines what your practice is worth — vary meaningfully by mix.
Action Items / Food for Thought:
Calculate your insurance mix as a percentage of production, broken into FFS, PPO (by network), and government programs (Medicaid, etc.)
Track this monthly. It moves more than most owners realize
Industry-leading practices in growing markets run 50-70 percent FFS. Healthy is 30-50 percent. Below 25 percent FFS, you're effectively running a PPO-financed practice — and that's a different valuation conversation
2. What "PPO Mix" Actually Costs You
Let's get specific about why insurance mix matters financially.
A standard PPO contract requires you to accept a write-down of 25-40 percent of your usual fee in exchange for being on the network. So a $1,400 crown becomes a $900 crown. That difference is not "lost revenue" — that's lost margin, because your costs to deliver the crown haven't changed.
Stack that across thousands of procedures per year. The annual margin compression from being on a network you don't really need is substantial. For a $2 million practice with 50 percent PPO mix, walking out of one heavy-write-down PPO contract could mean $80,000 to $150,000 of recovered margin in the first year.
That's not theoretical. That's a real number that real practices recover when they audit which networks they actually need.
The catch — and there's always a catch — is that walking out of PPO contracts loses you patients. How many depends entirely on your local market, demographics, alternatives in your area, and how transparent you are with patients during the transition. The math has to be done with your specific patient base.
Action Items / Food for Thought:
For each PPO contract, calculate the annual write-down dollars (claims billed minus claims received)
Identify the 1-2 contracts with the highest write-downs as a percent of fees
Run the audit: if you dropped that contract, what's the realistic patient retention scenario? Run optimistic, realistic, and pessimistic
Decide based on the math, not on inertia
3. Buyers Are Reading Two Stories From Your Mix
When a sophisticated dental buyer looks at your insurance mix, they're reading two things at once.
Story one: where is your revenue coming from today? This sets the trailing twelve months baseline they'll underwrite from. Higher FFS = higher quality of revenue.
Story two: where is your revenue going? Is your FFS percentage growing year over year, flat, or shrinking? Is your hygiene production drifting toward Medicaid as the geography shifts? Are PPO write-downs compressing your margin trend?
Story two often matters more than story one. A practice with 35 percent FFS that's been growing FFS share for three years tells a great story. A practice with 50 percent FFS that's been losing share to a heavy PPO mix for two years tells a worrying one.
Buyers are smart. They look at trends. The practice that has its mix moving in the right direction gets a better multiple than one that's just sitting on a snapshot number.
Action Items / Food for Thought:
Pull your insurance mix trend by month for 24-36 months. Is it moving in your favor or against you?
If it's against you, the work is to understand why and reverse it
If you can't reverse it (the local market is the way it is), be ready to talk about that honestly with buyers — they'd rather hear an honest explanation than try to figure out what's happening from the data
4. Strategies That Move the Mix
Moving your insurance mix is a 12-24 month project. There aren't quick fixes. But there are deliberate moves.
Drop a heavy-write-down PPO contract. This is the most direct lever. Pick the worst-performing contract, do the math, brace your team, and execute the transition. Most practices that do this deliberately recover their patient base within 12-18 months and end up with materially better margin.
Reposition your FFS pricing. If you've been quietly using PPO fee schedules as a reference for your FFS fees, you're underpricing. Audit and adjust. Most FFS-eligible practices have 8-15 percent of pricing recovery available without losing patients.
Build a membership plan. A practice-branded membership plan for uninsured patients does several useful things at once: it builds recurring revenue, it lets you compete with insurance without being on insurance, and it shifts your mix toward FFS-equivalent over time. The structural design of these plans matters — see the wellness plan playbook in the related vet post for the principles.
Be deliberate about new patient acquisition. Where you advertise, what you say in your messaging, and how your team handles "do you take my insurance" calls all influence which patients walk in. Most practices don't think about this strategically. The ones that do, shift mix faster.
Action Items / Food for Thought:
Pick ONE move from this list to commit to for the next 6 months
Measure mix monthly so you can see whether it's working
Don't try all four at once. Sequence them
5. The Conversation With Your Team
The hidden problem with shifting insurance mix is that it requires your team to have a different conversation with patients — and most teams haven't been trained to have it well.
When a patient calls and asks "do you take my insurance," there are three different right answers depending on what you actually want:
If you want to take everyone: "Yes, we accept most major plans, and we'll verify your benefits before your visit"
If you want to be selective but inclusive: "We're not in-network with that plan, but most of our patients with [Plan X] still find us a good fit because [reason]. We'll help you understand any out-of-pocket cost"
If you want to be FFS-leaning: "We're a fee-for-service practice that focuses on [quality positioning]. Most of our patients use their insurance for partial reimbursement on out-of-network claims. We can help you understand what that looks like"
These aren't the same scripts. Different practices need different scripts. What matters is that your front desk knows which one applies to your practice and delivers it consistently.
Action Items / Food for Thought:
Listen in on 5-10 new-patient phone calls. What's your team actually saying when asked about insurance?
If the script doesn't match your strategic intent, fix it
Train, role-play, and audit. The phone call is where mix actually shifts or doesn't
6. The Pre-Sale Mix Conversation
If you're 18-24 months from a sale, your insurance mix work in that window is one of the most leveraged things you can do.
Specifically:
A 5-10 point shift in FFS percentage in that window can mean a 0.5x EBITDA multiple improvement
A trending-up FFS line in your trailing twelve months tells a buyer you've been investing in mix quality
A clean explanation of any local-market mix constraints helps a buyer underwrite confidently
The reverse is also true. A trending-down FFS line, a creep toward Medicaid that you haven't addressed, a buyer write-down ratio that has gotten worse over three years — those all show up as discounts in offers.
The buyer isn't going to tell you they discounted because of your mix. They'll just offer less. Be the seller who knows the answer before they ask.
Action Items / Food for Thought:
If you're 12+ months from a sale, your mix work is your single most leveraged operational project
Track quarterly. Adjust. Document the strategy so you can tell the story in your CIM
Hire a consultant if you don't have a clear plan. The math justifies it
Final Thought
Insurance mix isn't a moral question. It's a financial one with a strategic frame.
A good dental practice can be 25 percent FFS or 75 percent FFS. Either can be a great business. What matters is that the mix is intentional, the trend is in the right direction, and the practice is priced for the value it actually delivers.
If you've been quietly drifting toward more PPO over the years because that's what felt easier — you're not alone. Most practices have. But that drift compounds against your sale price, and it compresses your margin while you own it.
The good news: mix is movable. Slowly, deliberately, with a real plan. The question is whether you start now or keep deferring.
If you want help running the mix audit and figuring out which lever to pull first, that's a conversation we have for free. No obligation, just a real look at the numbers.
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